RM/PF price rises ahead

custardy

All letters, parcels and packets are exempt from VAT, but the small print in the Budget revealed that Royal Mail will have to start levying VAT on some items from next year.

The document said: "From 31 January 2011 VAT will be applied at the standard rate to certain postal services provided by the universal service provider (Royal Mail)."


The Royal Mail insisted stamp prices would not increase and that most consumers would not notice any difference. However, many items sent by Parcelforce, the Royal Mail's service that guarantees next day delivery, will now be subject to VAT.

The change comes about after Royal Mail lost a ruling in the European Court of Justice (ECJ) last year, in a case brought by TNT Post, one of Royal Mail’s fiercest competitors. Under European Union law, taxpayer-owned mail operators are exempt from having to charge VAT on their services. TNT, DX and Royal Mail's main rivals in the business post market have always argued they were at a disadvantage from Royal Mail's tax break.

TNT successfully argued that the exemption should not apply to items of post that were subject to competition – in effect, business post.

A spokesman for Royal Mail said it was not yet clear exactly which bits of post would be subject to VAT, but it would mostly likely be business mail, with most customers able to enjoy a VAT refund because the are VAT-registered businesses. However, he admitted that Parcelforce, used by ordinary consumers, was likely to be hit as well.

He added: “The overwhelming majority of Royal Mail’s customers will be unaffected by the Government’s proposed changes in VAT announced today, and First and Second Class stamped and meter (franked) mail, Standard parcels and the large majority of Royal Mail’s other services will continue to be exempt from VAT.”

in real terms it relates to the courier type services,however it could be the small end of the wedge